2018 Global life sciences outlook - Innovating life sciences in the fourth industrial revolution: Embrace, build, grow - Deloitte
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
2018 Global life sciences outlook Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
2018 Global
Proposal life
title sciences
goes here | outlook l Innovating
Section title life sciences in the fourth industrial revolution: Embrace, build, grow
goes here
Table of contents
Outlook 3
Economic overview 3
Embrace 9
Embracing exponential changes in technology 9
Embracing geopolitical change 13
Build 15
Building an adaptable organization for the future of work 15
Building a culture of courage to help counter uncertainty 19
Building data integrity, maximizing the value of data 22
Building patient trust and centricity 23
Building a smart, cross-functional regulatory approach 26
Grow 29
Growing through partnerships and new operating models 29
What’s next: Actions for 2018 33
Appendix 35
Endnotes 37
Contacts 40
22018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
Outlook
Emerging technologies are creating a the journey of care and digital health. The sector generates a
transformative opportunity for life sciences, wide range of products including drugs,
•• Building a smart, cross-functional
and scientific achievements are on a record medical technology, diagnostics and digital
regulatory approach
pace. The geopolitical climate is ushering in tools.1
a new era led by the passage of tax reform
In order to grow, life sciences companies
in the United States and Brexit in the United Growth trends
will need to continue to look for new
Kingdom. In addition to embracing these
partnerships and operating models.
changes, life sciences companies are looking Pharmaceutical drugs
Alliances and partnerships will be
for ways to meet the opportunities and On the heels of a slow recovery, global
particularly important for accessing external
challenges coming in 2018. Forward-thinking prescription drug sales are forecast to grow
expertise and technology. And technology
organizations will be: at an impressive annual compound rate of
companies, both large and small, are already
6.5 percent in the next five years. Worldwide
•• Building an adaptable organization for the poised to disrupt the industry.
sales are expected to be US$1.06 trillion in
future of work
2022 (Figure 1).2 This growth is in contrast to
Economic overview
•• Building a culture of courage to help the 2.2 percent compounded annual growth
counter uncertainty rate (CAGR) in 2012-2016, but still under the
“Health life sciences” refers to the application
8.4 percent CAGR before the global financial
•• Building data integrity, maximizing the of biology and technology to improve health
crisis in 2004-2008.3 However, this trajectory
value of data care, and includes biopharmaceuticals,
could be tempered by pricing pressures and
medical technology, genomics, diagnostics
•• Building patient trust and centricity, across a potential second patent cliff.4
Figure 1. Worldwide total prescription drug sales, 2008-2022
1200
+6.5% CAGR 2017-22 1,060
990
1000
WW Prescription Drug Sales ($bn)
920
860
811
800 768 774
732 727 750 741
719
664 686
649 695 739
600 651
614
587
579 563 575 567
587 568 567
556
400 536
547
189 209
200 169
151
123 134
96 102 115
79 84 90
60 70 70
95 101 106 112
54 54 60 66 67 70 75 77 79 84 90
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Generics Orphan Prescription excl. Generics & Orphan
Source: EvaluatePharma, 2017
32018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
Although not at previous levels, most by an increasing middle class. China is The industry is expected to continue to
research-based pharmaceutical companies expected to reach the top three in the near face challenges in R&D returns (Figure 2).10
are reporting an uptick in revenue and future. However, constraints could come The cost of bringing an asset to market
profits. Spending on prescription drugs is from government incentives that reduce reached record levels in 201711 and many
expected to increase in every market except medication reimbursements and health care of the largest drug developers will continue
Venezuela over the next few years. Recovery costs.7 to be challenged by losses to generics.12
in spending will be fueled by consolidation With an increase in the number and speed
in generics markets and increased budgets Worldwide pharmaceutical and biotech R&D of approvals,13 a new normal in R&D is
for high-priced treatments, including orphan is forecast to grow 2.4 percent per year to triggering competition in pricing, leaving less
drugs. Some companies are still struggling 2022, slightly lower than the 2.5 percent time for a manufacturer to gain substantially
with patent expiries, estimated to be a annual growth between 2008 and 2016. Total for breakthrough applications.14 In 2018, the
US$194 billion risk for sales in 2022.5 R&D spend is expected to reach US$181 new US administration promises to continue
billion in 2022, compared to US$156.7 billion the path towards faster approvals, but the
The industry will continue to look to in 2016.8 Significant innovation is coming risk in accelerated approvals can be a drug
emerging markets for growth, albeit not as from small niche companies focused on turning into a market disaster.15
aggressively as in the past.6 Among the top discovering new drugs. Less than a quarter
20 pharmaceutical markets in the world, of drugs discovered are brought to market
eight are emerging countries supported by the big pharmaceutical companies.9
Figure 2. Three-year rolling average returns on late-stage portfolio, 2010-2017
20%
17.0
15% 14.1
Mean - extension cohort
12.6
Top performer
10% 8.4
Absolute IRR (%)
6.7 Third quartile
6.0
Original cohort
5.0 4.8 Mean
3.7
5% Median
First quartile
0%
Bottom performer
-5%
2010-2012 2011-2013 2012-2014 2013-2015 2014-2016 2015-2017
Extension cohort Original cohort
Source: A new future for R&D? Measuring the return from pharmaceutical innovation, Deloitte Centre for Health Solutions, 2017
42018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
Orphan drugs The passage of the new US tax law reduces considerable cost savings with biosimilars,
The orphan drug market is expected the orphan-drug credits that biopharma even when market share is low.25 Typically,
to almost double in the next five years, companies can claim by effectively 40 biosimilars are around 30 percent less
reaching US$209 billion in 2022. It’s percent.22 However, the reduction is not expensive.
expected that these high-cost, specialized likely to change life sciences companies’
drugs have and will continue to face pricing strategies. The orphan drug market is a The highest impact in US biosimilar sales
scrutiny by policymakers. Of the top 100 strategic market that solves unmet needs. is expected in the next two years, with an
drugs in the United States, the average cost The key benefits are not just the tax credit, estimated 25 to 35 biosimilars expected to
per patient per year for an orphan drug was but the other important aspects such as be on the US market by 2020.26 However,
US$140,443 in 2016, compared to US$27,756 the seven-year market exclusivity, faster there are headwinds in the United States
for a non-orphan.16 FDA review and waived fees, and exception without a clear regulatory pathway.
from the ACA branded drug pharma fee for
According to the US Food & Drug orphan-only drugs. The Asia-Pacific region has more biosimilars
Administration (FDA), 75 orphan drugs were in development than anywhere else in the
approved in the United States in 2017,17 Biologics and biosimilars world, led by China (Figure 3). China has the
compared to a total of 27 in 2016 and 56 Biologics are predicted to comprise more potential to become the frontier market for
in 2015.18 The 50 highest-selling orphan than a quarter of the pharmaceutical market biosimilar drugs.27 The growth of biosimilars
drugs each averaged approximately US$637 by 2020.23 With their success, the industry’s could push the industry into an innovative
million in sales.19 While only about 600 biggest biologics face revenue threats from phase, even the potential for increased use
treatments are approved, 7,000 conditions biosimilars and another patent cliff.24 of biologics.28
are designated as rare in the United States.20
Major scientific advances will lead to even Lack of affordability and access to biologics
more rare diseases being identified and even are driving tailwinds for biosimilars,
more drugs seeking approval despite pricing especially in emerging markets. In the
pressures.21 European Union (EU), countries are seeing
Figure 3. Country rank by biosimilar pipelines
Number of biosimilars in development by country
China 269
India 257
United States 187
South Korea 109
Russia 97
Switzerland 57
Argentina 48
Japan 45
Brazil 37
0 50 100 150 200 250 300
Source: Thomson Reuters
52018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
Improvements are being made in the compared to approximately 28 percent in Therapeutic focus trends
manufacturing techniques used to produce 2017. Emerging markets and the United Oncology leads therapy areas in sales
biosimilars. We could see biosimilar States will drive demand for generics as they (Figure 4) and is likely to account for 17.5
manufacturing representing 10 percent continue to cut health care costs.30 percent of prescription drug and OTC sales
or more of some companies’ global by 2022, more than the next three highest
biomanufacturing capacity in the next few Generics now make up more than 80 therapy areas combined.31 In addition to
years.29 percent of the volume of drugs dispensed oncology, the largest CAGR growth in the
around the world, and that percentage will top 15 therapy categories will come from
Generics continue to grow as more drugs lose patent immunosuppressants, dermatologicals, and
Global generic drug sales are expected protection. Many of the bigger products anti-coagulants.32
to make up 29.2 percent of the total coming off patent are biologics.
pharmaceutical sales worldwide in 2022,
Figure 4. Top 15 prescription drug & OTC therapy categories by worldwide sales, 2016-2022
Therapy area 2016 WW sales (US$B) Projected WW sales 2022 (US$B)
1. Oncology 93.7 192.2
2. Antidiabetics 43.6 57.9
3. Anti-rheumatics 53.3 55.4
4. Anti-virals 48.5 42.8
5. Vaccines 27.5 35.3
6. Bronchodilators 28.3 30.1
7. Sensory organs 20.2 28.3
8. Immunosuppressants 11.6 26.3
9. Anti-hypertensives 24.8 24.4
10. Anti-coagulants 14.1 23.2
11. MS therapies 21.6 21.7
12. Dermatologicals 10.5 19.9
13. Anti-fibrinolytics 11.6 17.1
14. Anti-hyperlipidaemics 13.8 13.4
15. Anti-bacteria 10.5 12.8
Top 15 434 601
Other 369 500
Total 803 1,100
Source: EvaluatePharma, 2017
62018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
Personalized medicine Medtech in 2017. As a percentage of sales, the R&D
The global personalized medicine market Worldwide medtech sales are forecast to investment rate is forecast to decline from
is forecast to reach $2.4 trillion in 2022 at a grow at an annual compound growth rate 6.9 percent in 2016 to 6.4 percent in 2022.37
CAGR of 11.8 percent, more than double the of 5.1 percent, reaching US$521.9 billion
projected 5.2 percent annual growth for the by 2022 (Figure 5). In vitro diagnostics is The repeal of the US medical device excise
overall health care sector.33 Growth will be expected to remain the largest medtech tax was not included in the recent tax
driven by advancements in technology and segment with annual sales of US$70 billion reform and the medtech industry believes
targeted therapies that are more efficient, by 2022.36 the tax has a significant negative impact on
and can provide more value. The focus is on medical innovation.38 However, the industry
prevention and early intervention, rather Ranking second is cardiology, expected to continues to pursue alternative legislative
than advanced disease. reach US$62 billion in sales by 2022, followed measures to at least continue the two-year
by diagnostic imaging at US$48 billion, and moratorium on the tax that expired 31
More than 40 percent of all compounds and orthopedics, which has been growing slowly December 2017.
70 percent of oncology compounds have the at 4 percent per year to US$44 billion. The
potential to be personalized medicines.34 top 10 companies are expected to make up
Real-world data and artificial intelligence 37 percent of the medtech market in 2022.
(AI) technologies are accelerating the
development of the most fruitful molecules Global medtech R&D spending is expected
and compounds.35 to grow by 3.7 percent CAGR to US$33.5
billion by 2022 from around US$27 billion
Figure 5. Global medtech sales (US$B), 2016-2022
600
521.9
472.7 497.3
500
448.5
425.1
386.8 402.8
400
Medtech Sales
2016-22 ($bn)
300
200
100
0
2016 2017 2018 2019 2020 2021 2022
Source: EvaluateMedTech, 2017
72018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
M&A investment trends constraining M&A in 2017. US tax reform Medtech
offers some incentives to repatriating In 2017, the total value of medtech venture
Life sciences monies back to the United States, which financing deals rose considerably, despite
2017 saw a further decline in deal value from could spur additional high value M&A the number of deals falling.40 Finding new
2016, resulting from global economic and transactions. technologies to fuel future growth could be
political uncertainty. Large deals that were a challenge for large, established medtech
announced in 2017 tended to be focused on •• Capital markets remain strong. A weak companies.41
traditional acquisitions that were within the M&A deal environment across industries
core competencies of the acquirer. in 2016 has resulted in pent-up demand Exponential advances in technology make
According to Thomson Reuters data, the to create value through M&A transactions medtech ripe for innovation. Sensors,
largest deal through Q3 2017 is Becton going forward. analytics, AI, and other digital health
Dickinson & Co. acquiring CR Bard in April, in technologies are converging with medtech.
•• The life sciences sector remains
a deal worth $24.2 billion. In biotech, Gilead Companies have an opportunity to create
fragmented. Additional value can be
Sciences Inc. acquired Kite Pharma Inc. for new business models and pivot from product
captured via further industry consolidation.
$11.1 billion. In pharmaceuticals, Thermo developers to solution providers. Digital
Fisher Scientific, Inc. acquired Patheon NV Non-traditional, technology-oriented health technologies appear to be attracting
(99.0066 percent interest) for $7.2 billion.39 adjacencies represent an important aspect more venture capital investment than
of M&A strategy for life sciences companies traditional medtech as well as attracting new
We believe 2018 will see an uptick in deal in 2018. The convergence of tech with types of organizations to invest in the sector.
volume as well as value, and an increase in other sectors has been, to this point, largely
mega deals, for a number of reasons: driven by tech industry players themselves. Large medtech company partnerships are
However, we are now seeing consumer becoming an alternative to traditional venture
•• The passage of tax reform in the US, the
health, health plan, medical technology, capital investment. In comparison, biopharma
progress of the Brexit negotiations, and
and pharmaceutical sector participants has almost three times the partnership
the maturation of policy with respect to
pursuing M&A transactions that either activity as medtech (Figure 6).42
outbound deal-making from China clears
directly or indirectly respond to tech
up some of the uncertainty that was
advances and tech investment.
Figure 6. Biopharma has almost three times the partnership activity as medtech
1144 1159 1134
1067
983 998
924 894 915
869 851
Deal count
509 503 483
382 390 411 398
348 302 340
316
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Biopharma Medtech
Note: Strategic alliances include JV, co-development, co-marketing, and licensing deals
Source: Out of the valley of death: How can entrepreneurs, corporations, and investors reinvigorate early-stage medtech innovation, Deloitte Center for Health Solutions, 2017
82018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
Embrace
Embracing exponential changes in continue, coupled with concerns over the The FDA says that 3D printing is “a tantalizing
technology cost of innovation and the affordability of step toward changing the manufacturing
treatment.45 processes to offer personalized medicines.”48
The industrialization of life sciences While only one 3D-printed drug has received
3D printing FDA approval, 3D printing technology is much
We are in an era of exponential change – 3D printing is another promise of a new farther along for medical devices. About 200
a fourth industrial revolution. Emerging global industrial revolution as well as an 3D-printed devices have been approved in
technologies are creating a transformative opportunity to customize patient treatment. the last decade that can be tailored to fit a
opportunity for life sciences. Demographic For biologics, 3D printing is being explored as patient’s anatomy.49
and economic changes, increased patient a better way to manufacture cell and tissue
expectations, and the growth of personalized products. Drugs and disease models can Gene therapy
medicine are disrupting health care be tested on 3D-printed tissues instead of Gene therapy may disrupt the sector by
worldwide. on animals or humans.46 In manufacturing, offering customized, targeted patient
3D printing has the potential to lower costs, treatment, including newly approved CAR-T
AI and cognitive technologies, automation, increase production speed and flexibility, therapies (Figure 7).50 While adoption is
and computing power are advancing at an minimize distribution borders, and create still low due to availability, insights from
accelerating rate. Continuous manufacturing new markets worldwide.47 human genetics and precision medicine
technology and robotic process automation have transformed health care, bringing value
(RPA) are shortening production times and through innovative biotechnology.
increasing process efficiencies.
Figure 7. First CAR-T therapies approved
Everything is increasingly being connected,
and the physical and digital worlds are d from a patient’s blo
olate o
collecting massive amounts of data. Data re is ss called leukaphe d sam
ells a g a proce resi ple
Tc usin s
from the Internet of Things (IoT) can be
continuously accessed in real-time. As
data volume grows, the cloud is expected
Th to e
to provide on-demand scale. Blockchain
e i xp
so res
technology pilots are starting to emerge and
lat
ed CARs
cell ent,
cybersecurity remains a critical priority.
T ce
i
s
pat
s
lls a
the
odi they target and kill cancer
re re-
With advances in science and the growth
that r
are infused into
of new technologies, there is expected to
engineered and gene
ecognize and t
also be a growing demand for people who
can drive innovative insights from massive
T cells
amounts of data – creating new roles in life
arg
sciences.
e
fied
t
e
can mod
tica
Th wher
cer
lly
m
Advances in science and technology
cel fied
e
ls
i
2017 was a breakthrough year in scientific
achievements with drug approvals hitting
a 21-year high.43 Since 1950, we have not The ed
mo and
seen so many breakthroughs in such di
in v fied T cells are grown and
exp
s
itro, ell
quick succession.44 In 2018, the trend will produc ew c
ing millions of n
Source: A new future for R&D? Measuring the return from pharmaceutical innovation, Deloitte Centre for Health Solutions, 2017
92018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
Gene therapy will continue to play a AI in drug discovery volumes of data generated from EHRs,
significant role in the rare diseases A growing number of global biopharma claims, clinical trials, and other sources.
market. Since approximately 80 percent companies are using AI to streamline the
of rare diseases are of genetic origin, gene drug discovery process. AI algorithms can Many inpatient health care services can
therapy is a rapidly emerging treatment, analyze large data sets from clinical trials, now be delivered more effectively at home
with several pharmaceutical and biotech health records, genetic profiles, and pre- or in outpatient ambulatory facilities.
companies testing gene therapies to clinical studies. Patterns and trends within Clinical roles have been optimized and
treat various orphan diseases. Different this data can help develop hypotheses at providers can use cognitive technologies
approaches are being explored, such as a much faster rate than researchers alone to deliver more seamless, integrated care,
the replacement of a defective gene with and deliver new insights more quickly.52 designed around patient needs.53 Social
a healthy one, inactivation of a mutated media, mHealth, wearables, connected
gene, and introduction of a new gene in the Technologies in the connected journey devices, and telemedicine all have the
patient’s body to fight a disease. According of care potential to transform how patients engage
to the Alliance for Regenerative Medicine, Cognitive computing is also being used to in clinical trials (Figure 8).54
currently 34 gene therapies are in the final improve patient outcomes. Companies are
US FDA approval stage and 470 are in initial partnering with large and small technology
clinical trials.51 companies to derive insights from the high
Figure 8. Technologies that can benefit patient engagement and clinical trial productivity
Social media and Crowdsourced input
online platforms into clinical trials
can improve engagement with can improve the patient
patients and encourage trial experience, increase patient
enrollment. For example, patient retention and may result in
advocacy groups provide a patients self-selecting to enroll
wealth of online resources to in clinical trials.
patients, including information
on relevant clinical trials.
Telemedicine mHealth
allows for patient touchpoints can be a rich source for
without a site visit, reducing the collecting direct patient data
burden on patients and investigators. through electronic diaries,
The reduced burden could increase electronic patient reported
patient retention and create capacity outcomes (ePRO), or other
for centralized investigators to patient input. Direct patient
manage a greater and more expansive input using validated
cohort of patients for any given trial. instruments could provide
richer insight into the patient
experience using the therapy
under evaluation.
Wearables and
connected devices
allow for continuous monitoring
of important biometrics, such as
activity, heart rate and glucose levels.
This continuous monitoring allows for
greater ability to capture data relevant
to the safety and efficacy of a product.
Source: A new future for R&D? Measuring the return from pharmaceutical innovation, Deloitte Centre for Health Solutions, 2017
102018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
Speed, scale, complexity, and security computing and storage resources when cognitive automation are expected to bring
needed. Combined with newer big data transformational change to R&D (Figure 9).56
Cloud computing technologies, using the cloud can improve
Another trend is the adoption of cloud analytical systems’ overall performance to These emerging technologies can improve
technologies for the speed, scalability, manage real-world data.55 study design, physician and patient
flexibility, and security they provide. More recruitment, and in-trial decision making
than 60 percent of life science leaders Technology accelerating R&D as well as increase efficiency and accuracy
surveyed by Deloitte said having a scalable The use of big data for evidence generation in repetitive tasks all the way through to
environment was “most important.” As could vastly improve the speed and regulatory filing.57
data volume grows, the cloud can provide outcomes of clinical development. AI,
on-demand scale, allowing users to access real-world evidence (RWE), and robotic and
Figure 9. Applications of real-world evidence (RWE) in R&D
• Support evidence generation across a product lifecycle
• Help understand the burden of the disease, illuminate any unmet needs,
and provide epidemiological data
Understand
rare diseases
• Reduce the cost and time it takes to execute a trial
• Demonstrate improvements in outcomes that are of interest to
health plans and health care providers
Serving as a
control arm in
clinical trials
Supporting • Compare before and after drug treatment data with clinical
Applications of RWE in R&D label expansion trial data to determine any other potential indications
Expediting the
development of
life-saving
treatments • Potential to expedite assessment when there is no time or
opportunity to conduct a randomized clinical trial
Expediting
patient
enrolment
• Ability to better track and connect with patients, allowing patient
enrollment to occur at the point of care
Source: A new future for R&D? Measuring the return from pharmaceutical innovation 2017, Deloitte Centre for Health Solutions, 2017
112018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
In the future, a “virtual control room” Because many of the supply chain research organizations.
could provide real-time insights for compliance processes are routine, they can
continuous improvement in a data-driven be optimized through a scalable, flexible For pharma, the blockchain can record
R&D operation, including site-less virtual solution that leverages advanced data irrefutable evidence on the performance
clinical trials. But R&D leaders surveyed analytics, cognitive computing, and RPA.59 of a medicine and demonstrate adherence
say a paperless R&D world is still a distant This will not only reduce costs, but also to a prescribed regimen, issues that
prospect.58 improve accuracy and reliability.60 continue to be a priority for the sector
(Figure 10).61 Other use cases include smart
Technology optimizing the supply chain Blockchain technology contracts and evidence sharing between
Accelerating technologies are also bringing Pharma companies are starting to explore regulators and collaborators in R&D. In the
dramatic transformation to the pharma blockchain technology. The blockchain is a future, blockchain solutions from different
supply chain. Traditional linear and siloed shared, immutable record of peer-to-peer companies or even industries will be able to
supply chain processes will be transformed transactions built from linked transaction communicate and share digital assets with
into connected “digital supply networks” – blocks stored in a digital ledger. The each other seamlessly.62
harnessing the power between the physical blockchain allows each patient data source
and digital worlds, including visibility of third to be a “block” of a complete, unalterable Even though pilots abound, the adoption of
parties. patient data profile that can then be shared this technology as an integral platform is still
securely with health care providers or in a nascent phase.
Figure 10. Blockchain can benefit pharma supply chain
1. Improve drug safety
The blockchaln can provide the basis for tracing
drugs from manufacturer to end-consumer,
identifying where the supply chain breaks down.
It can help companies keep track of active
pharmaceutical ingredients during the
manufacturing process, detect drugs that by error
do not contain the intended active ingredients
they are meant to and filter out counterfeit drugs.
2. Monitor movements through different channels
There are many links in the supply chain with multiple,
incompatible legacy computer systems, leaving manufacturers
with little visibility of end-customer sales; blockchain can help
track how drugs move from manufacturer to end-consumer.
3. Increase public safety
Various public safety issues could be helped by
blockchain technology, including product recall
management and prescription drug abuse, which
is often hampered by disconnected health care
records across hospitals, walk-in clinics, doctors
and pharmacies.
Source: A new future for R&D? Measuring the return from pharmaceutical innovation, Deloitte Center for Health Solutions, 2017
122018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
Scale and complexity of cyber threats Embracing geopolitical change Understanding the need for a good value
The scale and complexity of cyber threats proposition is vital. Value-based contracts
will require organizations to elevate Pricing pressures and value-based are contingent upon proving better patient
cybersecurity to a constant, critical priority. contracting outcomes over peer products to receive
In the next year, 70 percent of all enterprise reimbursement.71 For some high-value,
cybersecurity environments are expected Pricing pressures and portfolio high-cost treatments, like curative therapies,
to use cognitive/AI technologies to assist strategies value-based contracting models could
humans in dealing with cyber threats. IT Pricing, along with securing market access, amortize costs over a longer timeline.
architectures are increasingly being secured are expected to continue to be a top priority Medtech companies are also in the early
through cloud, hosted, or software as a for life sciences companies in 2018. Changes stages of value-based contracting.72
service (SaaS) security services. Another in the payer and pricing environments in the
growing trend is biometric authentication, United States and Europe have meant that New geopolitical climate
expected to be used in half of all online larger companies are re-balancing portfolios
transactions by 2021.63 to ensure that high price products are not Tax reforms worldwide will create incentives
over-represented, and that broad access to and disincentives for the life sciences sector
Demand for data, analytical, and AI markets is maintained.65 Several countries and impact future investments. The United
talent are focused on cutting pharmaceutical States passed a major overhaul of its tax law
pricing, including Australia, France and at the end of 2017, and most provisions are
New technologies are creating new roles Germany.66 already in effect for 2018. A lower corporate
in life sciences, including the addition of tax rate of 21 percent from 35 percent could
a chief data officer to the C-suite in many Balancing the value and volume parts of the make the US market more competitive.73
organizations. While demand for data, business is seen as a key to a successful R&D
analytical, and AI expertise is increasing, portfolio strategy.67 Companies focused on Under the new tax law, US-based
there is a scarcity of talent. consistent therapeutic areas (TAs) and few multinationals are required to pay US tax
classes of high value products are seeing on all previously untaxed accumulated
Life sciences companies compete for the the highest returns in the sector. However, offshore earnings. This one-time transition
majority of data scientists and graduates activity in some areas of R&D serving the tax will be levied at 15.5 percent on cash and
with other technology companies or payers smaller markets – particularly rare diseases equivalents, and an 8 percent tax on non-
and providers. Only one-fifth of companies – remains important.68 Companies focused cash earnings. This provision will incentivize
recruit data scientists from other life on immunotherapy and oncology are more many to bring overseas cash back to the
sciences companies, looking for talent often pursuing portfolio combinations of United States.
already familiar with RWE. The rest are new molecular entities (NMEs).
training in-house statisticians from other While extra capital may now be
departments.64 Precision medicine is emerging as an answer available to fund additional research,
for the growing demand from payers for business expansion, job growth and
Hiring from other industries is seen as an more personalized therapies that have more capital expenditures, some companies
opportunity to get new insights. However, chances of treatment success and incur may approach domestic expansion
life sciences companies are challenged to less overall health care cost as compared to conservatively, given that certain capital
retain this talent due to a lack of operating traditional therapies.69 allocation decisions are long-term in nature
models and talent structures conducive to and the permanence of US tax reform may
new work paradigms. For example, data Value-based contracting be in doubt. Those making acquisitions
scientists need to be integrated across Value in the eyes of patients and payers is can expect potential limits on the ability to
the organization, not in IT silos, to deliver expected to increasingly drive pricing, not deduct interest expense, but opportunities
actionable insights and a holistic view of simply cover R&D expenses.70 Payers in the to expense the purchase of new or used
data. United States, the National Health Service fixed assets, even if part of an asset
(NHS) in the United Kingdom, among others, acquisition of a business.
If big pharmaceutical companies do not are signing value-based contracts with
provide this talent with opportunities to pharmaceutical companies.
maximize their skillsets and provide upward
mobility, they can expect to lose them to
smaller startups and other industries.
132018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
Companies that outsource manufacturing It stays committed to helping patients It was announced that the European
activity offshore or have earnings from maintain access to innovative new therapies. Medicines Agency (EMA) will also be
foreign customers may enjoy an incentive The agency is also committed to digital relocating its operations to Amsterdam
from the new law which could further innovation. In 2018, nine companies are in the next 16 months, resulting in a loss
reduce the 21 percent corporate tax rate. taking part in the FDA’s Pre-Cert program of approximately 1,000 jobs in the United
However, two provisions on global business that shifts approval of a product to the Kingdom. The change will potentially disrupt
operations may increase the US tax burden. software or digital health technology the EMA’s work as well as drug approval
First, US multinationals that have low taxed developers.79 New implementation guidance processing and monitoring in the European
earnings offshore will be required to pay for legislation related to digital health Union.83
additional US tax on those earnings. Second, innovation and greater clarity on the 21st
a new alternative minimum tax, called the Century Cures Act software provision are The Identification of Medicinal Products
Base Erosion and Anti-Abuse Tax, could planned for 2018.80 (IDMP) regulation is driving change to
negatively impact US subsidiaries of foreign- pharmaceutical companies’ product-related
based companies as well as US-based To learn more, please refer to the US Life processes and systems – ushering in a new
multinationals who procure certain goods Sciences Regulatory Outlook for 2018. era of cross-functional collaboration. Also in
or services from their foreign parents or 2018, proper (meta) data management will
affiliates. EU regulatory highlights be essential as the General Data Protection
Regulatory changes occurring across the Regulation (GDPR) will be enforced starting
In 2018, the US administration is expected European Union will impact companies 25 May 2018.84 In Europe alone, 28,000
to continue to advocate for policy changes selling product into the European Economic new data protection officers (DPOs) will be
to reduce drug prices,74 and the medtech Area (EEA) region. The effects of the United required to lead compliance. Organizations
segment is expected to continue to battle Kingdom leaving the European Union will who are non-compliant face heavy fines and
against the 2.3 percent medical device excise not only be felt in these regions but globally. proactive and robust privacy governance will
tax.75 Significant implications are expected for be required.85
supply chains, regulatory, clinical trials, and
In the United Kingdom, policies on patents, tax compliance. Currently, there is still uncertainty as to how
data protection, clinical trials, and marketing regulators will respond to the growing use
authorizations are among Brexit’s key Currently, many life science organizations of innovative digital technologies. Pharma,
implications for pharma. The UK government are planning for maximum change should alongside other health app developers, will
recently secured commitments from 25 negotiations not provide more favorable need to engage directly with key regulatory
organizations to ensure the country remains conditions on a timely basis.81 In a report bodies to clarify compliance requirements.
a pharma hub after it leaves the European to the UK government, Professor Sir John The legal and financial ramifications of non-
Union.76 Bell states that regulatory and technology compliance could be significant.86
changes are an opportunity for the United
US regulatory highlights Kingdom, and believes investments in To learn more, please refer to the Impact of
Regulators have found the pace and rate of innovation must be adopted post-Brexit. EU regulatory change on the global life sciences
change challenging and continue to modify The same innovation that drives global industry.
their policies and regulatory procedures to economic growth could be used to improve
keep pace with the widening use of digital outcomes in the NHS and reduce costs. He
products in health care.77 recommends establishing a new regulatory,
Health Technology Assessment, and
The FDA is working on a new framework commercial framework to move the industry
for a comprehensive, science-based policy forward.82
for proven regenerative cell therapies.78
142018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
Build
Building an adaptable organization for Capital survey.87 Technology is transforming •• Work built around technology, for greater
the future of work the workplace. The new world is augmented, efficiency
and rules have changed (Figure 11).88 The
•• A skills-based economy, where talent will
Old rules vs. new rules future of work will be more networked,
be the differentiator
devolved, mobile, collaborative, team-based,
Building an organization of the future is the project-based, and fluid. Organizations will •• Augmented Intelligence, combining
most important challenge of life science and need to adapt to emerging trends: machine intelligence with human insight
health care human resource (HR) leaders
•• New leadership mindsets, networked and •• Organizations and talent connecting on
responding to Deloitte’s latest Global Human
inclusive mission, values, and ethics
Figure 11. The future of work: The augmented workforce
Old rules New rules
Jobs and tasks are being redesigned to use more
Machines and artificial intelligence are
essential human skills, and are augemented by
taking over jobs (replacement)
technology (augmentation)
A continuum of talent is available, including
Full-time employees are the main source of talent contractors, gig employees, crowds, and
competitions
The focus in workforce planning shifts to start
Workforce planning focuses on full-time
with work and analyzing options across multiple
workforce and skill requirements
workforces and technologies
The half-life of skills continues to decrease rapidly,
Jobs are relatively static with fixed skill requirements
and work is being constantly reinvented
Projects, assignments, and tours of duty are
Jobs and career ladders are the
building blocks for work; careers are portfolios
foundation of work and the workforce
of projects and experiences
Integrating people and technology is a
Robotics and cognitive technologies are IT projects
multidisciplinary task
HR has a strategic role to facilitate and
HR's job in automation is to focus on change
orchestrate the redesign of jobs and train
management and workforce transition
the augmented workforce
The fundamental elements of work are “jobs,” with The fundamental elements of work are “tasks,”
formally developed ”job descriptions” which are aggregated into jobs and roles
Source: The future of work: The augmented workforce, Deloitte Insights, February 2017
152018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
The challenge for many life sciences and A major threat to life science organizations New models of organizational structure,
health care organizations is the slow rate of is that too few leaders and board members culture, and rewards will emerge.92
adopting new technologies. Many still work understand the impact advanced Organizations will be less hierarchical in
on systems or hierarchical processes that technologies have, or will have in the future, the future, and leaders will need to provide
are 20 to 30 years old, and change will come without seeing these applications at work. greater autonomy at team and individual
more slowly. For this reason, many organizations are levels. They need to be able to step back and
looking outside the sector for talent. But see the full picture, ask the right questions,
New leadership mindsets, networked without an informed, forward-thinking then trust that teams will come up with the
and inclusive mindset, the life sciences sector could right strategies.93 Big picture leaders are
remain at a disadvantage in competing with often generalists, who have more than one
The leaders of the future will be network tech companies for this talent. specialization, and will be better skilled at
architects, able to connect work and breaking down silos and bridging knowledge
resources through broad networks. In a In a survey conducted by Deloitte, more across an organization.94
world where markets, customers, ideas, than 40 percent of C-level leaders expect to
and talent are all diverse, leaders will need put more focus on facilitating the exchange Informed leaders of the future will recognize
to have an inclusive mindset.89 Work will be of ideas. By 2021, most of these executives these forces of change, how work is
redesigned around technology and learning, expect to move away from email in favor being redefined, and the implications for
and leaders embracing digital technologies of more collaborative digital platforms. individuals, organizations and public policy
will see knowledge flow through networks. These technologies will provide greater (Figure 12).95
Leaders must be role models for new ways transparency, resulting in more personal
of working.90 accountability, and changes will be able to be
made in real-time.91
162018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
Figure 12. Navigating the future of work
Forces of change
1. Technology: Al, robotics, sensors, and data
2. Demographics: Longer lives, growth of younger and older
populations, and greater diversity
3. The power of pull: Customer empowerment and the rise of
global talent markets
Work and workforces redefined
1. Reengineering work: Technology reshapes every job
2. Transforming the workforce: The growth of
alternative work arrangements
Implications Implications Implications for
for individuals for organizations public policy
1. Engage in lifelong learning 1. Redesign work for technology and learning 1. Reimagine lifelong education
2. Shape your own career path 2. Source and integrate talent across networks 2. Transition support for income and
3. Pursue your passion 3. Implement new models of organizational health care
structure, leadership, culture, 3. Reassess legal and regulatory policies
and rewards
Source: Navigating the future of work, Deloitte Review, July 2017
172018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
In a skills-based economy, talent will be As work is constantly reinvented by tellers. While ATMs did take over many of
a differentiator technology, individuals will need to the tasks formerly performed by tellers, an
continually add new skills and adapt to new opportunity opened up to make banking
The future is a skills-based economy. teams and work environments.101 It will be more personal. Jobs became more varied as
Talent is already being curated around the job of companies to consistently train tellers became liaisons for the marketing of
specific projects and tasks on demand, and people to be prepared for a job that may not new financial products. There are now more
organizations will become more agile. It is even have been invented yet. Micro-learning than 400,000 ATMs in the United States but
easier than ever before to find and connect is one way companies can maximize learning also more than 550,000 tellers.105
with specialized talent through an array of in a minimum amount of time102 along with
digital tools.96 embedding learning opportunities into work The difference today is that a wide array
processes. of jobs across the life sciences workforce
Work environments are increasingly fluid and are expected to be augmented, combining
dynamic. In the United States, 40 percent According to Tom Friedman, author of machine intelligence with human insight.106
of the workforce is already contingent,97 Thank You for Being Late: An Optimist’s Guide The world will demand more people who can
and more than half of millennials are to Thriving in the Age of Accelerations, if a operate at the highest levels of thinking and,
freelancers.98 Deep specialization can company is not providing both the resources more regularly, make difficult, complicated
be accessed, wherever it is located, and and the opportunity for lifelong learning, decisions.107
deployed, wherever it is needed, anywhere they’re doomed.103
in the world.99 Life sciences is just starting to identify the
Augmented intelligence, combining work and workforce segments that will
Individuals who work in a “gig economy” may machine intelligence with human become early adopters of rapid process
have a variety of employers, and control their insight automation. While information technology
own time and terms. Seventy percent of the (IT) and finance have seen the most
time, they provide services remotely. This Technological advances are remaking every activity, RPA is also poised to improve the
talent will choose to work with those who sector of the economy and society. Robotics, accuracy and quality of processes in R&D,
support their values and work styles.100 AI, sensors and cognitive computing will pharmacovigilance, and supply chain.
result in the redesign of almost every job.
The challenge for organizations will be the The World Bank suggests that 57 percent of Connecting on mission, ethics, and
fierce competition across industries for the people will lose their jobs to automation in values
most desirable talent and in-demand skills. the next ten years.104 However, in many cases
In addition to new digital and analytical historically, where technological progress Culture is critical, and grows in importance
skills, there will be a demand for skills that replaced some jobs, it also created new roles at scale. In a Deloitte survey of C-level
are “essentially human,” such as curiosity, and opportunities. executives, almost 70 percent agree that
imagination, creativity, and social and realizing an organization’s mission and
emotional intelligence. Thirty percent of For example, when automated teller values depends on culture (Figure 13).108
high-paying new jobs are predicted to machines (ATMs) were first introduced,
require these social, human skills. many feared they would replace bank
182018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
Figure 13. Degree of impact an organization’s culture has on the ability to realize its mission and values
Not sure 2.4%
No impact at all 2.4%
Not much of an impact 2.0%
Neutral 9.8%
Somewhat of an
important impact 13.8%
A critically
69.1%
important impact
Note: Numbers do not add to 100% due to rounding
Source: Transitioning to the Future of Work and the workplace, Deloitte, 2016
Being able to manage across generations In life sciences, almost every organization Building a culture of courage to help
is more important than ever with five places “serving the patient” at the center counter uncertainty
generations now in the workforce. By of their mission. The differentiator will be
2020, millennials will constitute 50 percent how this mission defines expectations for Proactive vs. reactive leadership and
of the workforce and will drive the pace employees and their interactions with each governance
of change.109 More collaborative and other and the outside world.
socially responsible, this generation will An ethics-driven culture will be a massive
increasingly seek out organizations that Strong organizational cultures align on focus of regulators in the next few years.
share their values.110 values. But not all cultures encourage good Regulators expect the life science sector
or ethical behaviors. Building a culture to be proactive, rather than just react to
of integrity is also expected to become inquiries or defend themselves. Life science
increasingly important and will fortify an leaders can be proactive by developing a
organization against risk.111 clear roadmap for how behaviors should
align with values.112
192018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
In an ethics-driven culture, decisions are how human values will be reflected in the and social engineering (SE), web-based
made based on both what is right for algorithms and autonomous systems that attacks, or malicious code (Figure 14).115
compliance and right for the business. will be responsible for more and more These attacks exploit the weaknesses in
In the next year, leaders should not only decision making in the future. Forward- increasingly complex and interconnected
emphasize the right “tone at the top” but thinkers will need to anticipate potential systems. They can cause real-world security
also the right “tone in the middle” and ethical challenges and build the kind of AI- incidents that have the potential to impact
throughout an organization to insure ethical infused world we want to live in.114 patient care and safety, organizational
decision making.113 Only then, can people be assets, reputation, intellectual property,
empowered, and organizations can build a Proactive cybersecurity, minimizing risk relationships with customers, shareholder
culture of courage. value, and regulatory compliance.116
Innovations driving rapid growth create
Ethical decision making in a machine- complex cyber risks. Every year, the financial
run world impacts of security breaches to life sciences
organizations increase with significant
Who will determine ethics in a machine- physical impacts and added liabilities.
run world? The discussion is nascent on Cyberattacks result from malware, phishing
Figure 14. Components of a cyberattack
Organizations should drive focus on what matters by
understanding who might want to attack, why, and how.
• Cyber criminals • Rogue suppliers
• Hactivists (agenda driven) • Competitors
Who might attack? • Nation states • Skilled individual hacker
• Malicious insiders
• Sensitive data (i.e., reports, financial data, PII/PHI, etc.)
What are they after? • Financial fraud (i.e., wire transfer, payments, etc.)
(i.e., key business risks to • Identity theft
• Business disruption (e.g., building systems, etc.)
mitigate, motivations) • Threats to health and safety
• Spear phishing, drive by download, etc.
What tactics might • Software or hardware vulnerabilities
they use? • Third party compromise
• Stolen credentials
• Control systems compromise
Source: Deloitte analysis
202018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
Life sciences leaders need to be more Security by design
vigilant in deploying “critical” issue patches This approach helps manufacturers
from software vendors, be more aware of Incorporating cybersecurity practices design a device from the ground up to be
high profile, vulnerability disclosures, and into the product development life cycle is secure, versus adding security features
make sure there are valid business reasons often referred to as “security by design.” after the device has been delivered to
for exposing services to any public/untrusted Manufacturers are taking steps to secure market. However, security by design is not
network. devices prior to deploying them, and are enough. Staying ahead of adversaries in
conducting technical security testing and the evolving, connected medical device
security-risk assessment on devices while in landscape requires continuous identification,
development (Figure 15).117 assessment, and remediation of risks.118
Figure 15. Security in the connected health landscape
Connected health landscape
Medtech security concerns
The increasing quantity and types of
potential cybersecurity threats pose risks
to patient confidentiality, integrity of device
and patient data, and device operation
Cloud-based Ransomware
computing attacks Health care has become a
With the migration of software frequent target of cyberattacks as
to the cloud, the life sciences their data (IP, Pll, PHI) is valuable,
sector has been exposed to vulnerabilities are expanding as
new challenges such as health info is shared more broadly
Distributed Denial of Service and more individuals/organizations
(DDoS) attacks have access to systems
Regulatory implications Third-party access
of cloud usage Life sciences companies are
working with an increasing
Health authorities appear to
number of third
be focusing attention on
parties — leading to multiple
cloud platform cyber risks
connection points and
that could inadvertently
information exchange, resulting
impact patient safety or Big data management in increased cyber risk
product quality Companies will need to
safeguard IP, Pll, and PHI by
complying with privacy laws
and norms across jurisdictions
The solution:
• Effectively designing, developing, and implementing a Product Security ProgramTM
• Security-by-Design (SbD) promotes building security controls into the design and development
phases of products to facilitate secure practices and build safer, more secure products
• Product security risk assessment
Source: Deloitte analysis
212018 Global life sciences outlook l Innovating life sciences in the fourth industrial revolution: Embrace, build, grow
To mitigate cybersecurity risks, organizations manner. Currently, companies, and even Linking data and teams across silos
need to be proactive with real-time and departments within companies, might collect
near real-time monitoring, threat pattern data in different ways and use different In addition to creating greater efficiencies
collection, cyber threat modeling and terminology and definitions. This can make over the next year, life sciences companies
analysis, threat mitigation and remediation, it difficult to identify and compare quality will be creating a more collaborative, not
incident management, and threat intelligence issues between functional groups.121 competitive, culture. One way they can
reporting (Figure 16).119 break down silos is to form cross-functional
High expectations for data quality teams – stressing the importance of sharing
Cloud and security are not an “either-or” knowledge between departments and
proposition; data in the cloud is a high value Companies need to create a working therapeutic areas.
target. While cloud vendors are responsible environment that values data integrity. Data
for the security “of” their cloud, security “in” integrity is data that is complete, consistent, For example, some pharma companies have
that cloud is the enterprise’s responsibility. and accurate throughout the data lifecycle.122 multiple groups in regulatory – corporate
Organizations will need to avoid regulatory, R&D regulatory, supply chain
disconnected governance and misaligned In the next year, regulatory bodies will have regulatory. Data across these departments
security strategies.120 high expectations for data integrity due to will need to be unified, accessible, and
the adoption of automated systems and reusable to create value for these cross-
Building data integrity, maximizing the advanced technologies, including storage of functional teams.125
value of data data in the cloud.123 Data integrity can help
deliver insights for value-based pricing and
The biggest drawback to future innovation market access.124
is everyone tends to work in a very siloed
Figure 16. Cloud security risks
Third-party risk
Enterprises are dependent on cloud service providers
controls; shared responsibility model not well understood
High value customer data
Modern attack surface Cloud service providers are a high value
The walled enterprise is replaced target because “that’s where the data is”;
by a hybrid, complex environment increased risk of data exposure
Disconnected governance Misaligned security strategies
With the global nature of cloud data Hybrid environments are creating
centers, cloud consumers risk having integration challenges and
disconnected governance from organizations are struggling to
breach notifications and privacy laws Asset ownership unclear evolve beyond traditional security models
Organizations have not defined asset
owners, scope and boundary for
secure integration with cloud service providers
Source: Deloitte analysis
22You can also read
